On October 11, 2022, the International Financial Services Centres Authority (“Authority”) notified the International Financial Services Centres Authority (Setting up and Operation of International Branch Campuses and Offshore Education Centres) Regulation, 2022 (“IBC-OEC Regulation”), permitting foreign universities and educational institutions to open a branch in Gujarat International Financial Tec-City (“GIFT City”) in Gandhinagar, Gujarat. This stems from the proposal to allow the entry of foreign universities and institutions in GIFT during the FY 23 Union Budget announcements.
The GIFT City is India’s first greenfield smart city, containing a domestic tariff zone and an International Financial Services Centre (“IFSC”) in a multi-service special economic zone. Other than to create a world-class financial structure, establishing an IFSC ensures that all complex and innovatory financial transactions that were executed outside India can now be carried out from the GIFT City by the overseas branches/subsidiaries of the same Indian financial institutions. Foreign businesses are also allowed to raise money through the IFSC without any limitations on the ability to repatriate funds. This enables both domestic and international businesses to access the international markets through GIFT City. The International Financial Services Centres Authority Act, 2019, established the Authority as a separate unified body to handle all affairs of the units operating in the GIFT City and also laid down the orders & procedures for carrying out their functions.
At present, foreign universities are not permitted to set up a campus in India. They have been generally operating under various other structures such as IP licensing, credit transfers and twinning arrangements. There have been attempts to allow their presence in India, but none have fructified. Reciprocity and regulatory concerns have always been a hurdle. With GIFT City, a door has finally been opened.
The primary objective of introducing the IBC-OEC Regulation is to allow setting up of branches, either on a stand-alone basis, or in such other forms as may be permitted by the Authority. The regulations are applicable to a foreign university setting up an international branch campus (“IBC”) or a foreign education institute setting up an offshore educational centre (“OEC”). Foreign universities which are within top 500 in global overall ranking and/or feature in the latest QS World Universities ranking or such foreign educational institutions that are reputed in their home jurisdiction are eligible to set up an IBC or OEC in GIFT City. The registration is granted for a period of five years and is renewable for an additional period of five years. The IBC-OEC Regulations aim to promote research in banking, insurance, capital markets, funds management, fintech, etc., to produce high-end human resources for finance, technology and related fields.
Given that the IBC-OEC Regulation is open to other forms of partnerships, it is likely that certain foreign universities and foreign education institutions (“Parent Entity”) may even look for non-academic partners to help set-up a presence.
The applicability of the IBC-OEC Regulations is not just limited to foreign universities and includes educational institutions other than universities as well. Foreign Educational Institution has been defined under the IBC-OEC Regulation as an education institution outside India, which is not a university and is duly authorised to offer courses including research programmers within and outside its home jurisdiction. This opens up the avenue for non-degree and diploma granting institutions to also set up a presence in the GIFT City. It will be interesting to see how different institutions interpret this broad definition in order to enter GIFT City.
While the IBC-OEC Regulations require suitable infrastructure and facilities to be in put in place, the specifics for suitable infrastructure has not been built into the regulations. For example, there is no minimum square footage requirement, which is welcome since many of the branches would most likely be in vertical campuses. This gives the IBC and OEC the flexibility to operate out of infrastructure as per their requirement.
Since GIFT City is considered a foreign territory, all transactions undertaken by the IBC or OEC can be in freely convertible foreign currency only. However, certain transactions are permitted in INR through the SNRR (Special Non-Resident Rupee) Account. Critically, the Parent Entity is permitted to repatriate profits without any restrictions. This has been a hotly debated issue since the time India was considering foreign universities to set up campuses in India.
The IBC-OEC Regulations have also provisioned for safeguarding the interest of the students pursuing education in the GIFT City. The IBC-OEC Regulations require any course or programme conducted by an IBC or OEC in GIFT City to be identical to the program conducted by the Parent Entity in their home jurisdiction. Accordingly, all degrees, diplomas, certificates issued to the students in the GIFT City will be recognised and treated at par with the corresponding degrees in the home jurisdictions of the Parent Entity. Further, the selection plan followed by the OEC or IBC shall be identical or similar to that followed by the Parent Entity in its home jurisdiction. In the event of disruption or discontinuation of a course or programme, the Parent Entity will be liable to provide an alternative to the affected students, including their relocation to the Parent Entity’s jurisdictions to continue with the same course.
For Universities and education institutions based in Singapore, this could be an opportunity to participate in the India education opportunity. Singapore is a leading education hub in the region and can be a perfect springboard to GIFT City. There is already heightened collaboration in the financial services sector after the recent signing of a MOU in the fintech space between Singapore and the IFSCA. This collaboration can now extend to education and help in creating a GIFT city – Singapore education corridor.
The IBC-OEC Regulation is a welcome step and is true to the projected idea of an IFSCA, i.e., providing a soft-touch regulatory environment to facilitate the ease of doing business. Setting up a branch in GIFT City allows the foreign universities and foreign education centres an access to the booming Indian education sector. Hopefully, following the probable success of various education institutions in GIFT City, the Indian Government may consider liberalising education framework for mainland India as well. With the strategic location of GIFT City in South Asia that is home to large young population and caters to the growing demand for a skilled talent pool, the introduction of the IBC-OEC Regulations will act as the foundation stone for GIFT City’s success.